News Highlights - Week of 20 - 24 June 2016

To read the full report, data and graphs go to http://www.asianbondsonline.adb.org/newsletters/abowdh20160627.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

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On 23 June, the United Kingdom voted to leave the European Union. The decision brought about increased volatility in financial markets. The British pound fell 8.1% to USD1.3679 per GBP1.0 and the euro declined 2.4% to USD1.1117 per EUR1.0. Yields on 10-year United States Treasuries fell 19 basis points to 1.56%.

*     Emerging East Asian local currency (LCY) bond yields were mostly down between 1 March and 15 May amid weak global economic growth. While the outlook for the region’s LCY bond markets is generally benign, risks are rising, according to the latest edition of the Asia Bond Monitor (ABM) released on 24 June. The region’s LCY bond market expanded 3.9% quarter-on-quarter and 20.4% year-on-year (y-o-y) in the first quarter of 2016, reaching USD9,608 billion at the end of March. The ABM also includes a chapter examining the drivers of sovereign bond yields in emerging Asia. For a copy of the ABM, please click on the following link: https://asianbondsonline.adb.org/documents/abm_jun_2016.pdf?src=newsletter&id=uWidK3KdmgXVUWes9IgIcqKp1miwxx

*     In Hong Kong, China, consumer prices rose 2.6% y-o-y in May, slightly down from the 2.7% y-o-y uptick in April. Singapore’s Consumer Price Index fell 1.6% y-o-y in May after falling 0.5% y-o-y in April, marking the 19th consecutive month of deflation. The decline came mainly from housing and utility costs and transportation costs which account for 42.1% of the index. Consumer price inflation inched up in Viet Nam in June to 2.4% y-o-y from 2.3% y-o-y in May due to accelerating increases in the prices of food and foodstuffs.

*     The Bangko Sentral ng Pilipinas decided on 23 June to keep unchanged the overnight reverse repurchase rate at 3.0%. On 22 June, the Monetary Policy Committee of the Bank of Thailand voted unanimously to maintain the policy rate at 1.5%.

*     Japan posted a trade deficit of JPY40.7 billion in May, a reversal from the trade surplus of JPY823.2 billion in April. Exports of goods contracted 13.6% month-on-month (m-o-m) to JPY5.1 trillion in May from JPY5.9 trillion in April, while imports increased 1.3% m-o-m to JPY5.10 trillion from JPY5.07 trillion. The Philippines’ merchandise trade deficit widened to USD2.3 billion in April from USD1.7 billion in March as exports contracted and imports increased. Total merchandise exports fell 7.7% m-o-m to USD4.2 billion from USD4.6 billion. Total merchandise imports rose 2.7% m-o-m to USD6.5 billion from USD6.3 billion.

*     The Republic of Korea’s Producer Price Index fell 3.1% y-o-y in May following a 3.0% y-o-y decline in April. The annual drop in May was due to relatively large y-o-y decreases in product prices in the manufacturing and utilities sectors.

*     Singapore’s manufacturing output increased 0.9% y-o-y in May, compared with a 3.0% y-o-y increase recorded in April. Two out of six manufacturing clusters posted annual increases in May.

*     LCY government bond yeilds fell last week for all tenors in the Republic of Korea; and for most tenors in the People’s Republic of China; Hong Kong, China; Malaysia, Singapore, and Viet Nam. Yields rose for most tenors in Indonesia and the Philippines. While yield movements were mixed in Thailand. Yield spreads between 2-year and 10-year maturities widened in most East Asian markets except Indonesia, the Republic of Korea, Singapore, and Thailand.

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